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Side hustles are often born of necessity. Whether people are searching for a playground to test out new ideas, an outlet for creativity, or a way to generate extra income, side hustles have become a significant part of the American economy.
Sometimes, side hustles outgrow weekends and nights. While this is an exciting development and one that many people hope for, it can be hard to tell when it’s time to transition your side hustle to your main hustle. Doing so involves financial risk and legal ramifications, but it can also mean freedom.
There’s no magic formula, but here are a few key signals we’ve observed through the years we’ve been working with small business owners.
Quitting your day job and investing in your side hustle involves inherent financial risk. But if your venture is generating income every month that has the potential to meet your living expenses—and you have a cushion of savings that can help get you through until it does—this may be the clearest indicator that you’re ready to take the leap.
But here’s the key: That income should be consistent, reliable, and observed over a period of several months. We’ve seen entrepreneurs have one great month and decide they’re ready, only to find the boom is a one-off and next month they’re struggling. Your business won’t live in a bubble. There are many external factors that can affect revenue, including regulatory changes, seasonal demand fluctuations, and even weather. No one can predict the future, but if your side hustle has shown three to six months of solid revenue, you may be ready.
If you’re a freelancer and you’re entering into contracts with clients under your own name, you may be opening yourself up to liability risks. As a sole proprietor (someone who sells something without a legal business entity) there’s no legal distinction between you and your business. Say you’re a freelance photographer and something goes awry—a client trips over your equipment and gets injured, or you accidentally photograph someone’s trademarked artwork and use it commercially—you could be held personally responsible for damages.
Depending on your industry, larger clients may not even enter into a contract with a sole proprietor due to these liability concerns and a lack of credibility. This could seriously hinder your business’s growth. The good news is that you can start an LLC at any time and protect your personal assets, as long as you can afford the start-up costs and the maintenance fees, which vary by state.
Are you daydreaming about all the ways you can grow your side hustle? Ideas for new products? Additional markets you’d like to move into? Is our head swimming with visions for how an employee (or several!) could grow your business?
These are strong indicators that your side hustle has a solid foundation and room to grow.
This final point is the toughest to quantify, but life decisions aren’t always a numbers game. When considering quitting a stable day job to devote yourself to your side hustle full-time, it’s crucial to make sure you’re in the right headspace.
What does that look like?
Commonly, we see that successful small business owners have solid mechanisms for coping with stress. In the face of unexpected setbacks, income fluctuations, and the need to solve problems on the fly, they know how to soothe their nervous systems and think calmly. It might be exercise, mindfulness, or relying on a strong support system. High-pressure situations come for every business owner, but if you truly believe in your idea, your vision will carry you through the rough patches.
Weighing whether to take the leap into entrepreneurship involves both looking at the numbers and looking within. There’s usually no convenient time to do it, and when you do, it’s likely to feel a bit scary. But we genuinely believe that there’s no freedom like working for yourself and doing something you love.
ABOUT THE AUTHOR
Jon Garrison has been an integral part of the RAINC leadership team for the past three years, serving as the CFO and Treasurer with a strategic vision for driving the growth and development of our businesses. As an executive leader, Jon focuses on the strategic direction of the company, ensuring financial health and stability by enhancing business intelligence, overseeing financial reporting, managing taxation matters, and implementing robust control processes.